Abstract
Actively promoting circular economy (CE) is one of the key means of global sustainable development. The purpose of this study is to analyze the causal relationship between CE and economic growth using data from EU-25 countries from 2010 to 2018. The selected CE indicators included municipal waste recycling rate, CE-related investment, municipal waste generation per capita, circularity rate, and trade in recyclable raw materials. Panel cointegration techniques affirmed the long-term equilibrium relationship between CE indicators and GDP. Panel vector error correction model results confirmed that in terms of short-run causality, an increase in material recycling led to a decrease in waste generation, an increase in waste generation led to an increase in CE-related investment, and economic growth led to circular economy growth, but not vice versa. This implies that encouraging CE-related innovation investments and promoting material recycling to stimulate the secondary raw material market can help achieve zero waste goals. Looking at the long-term causality, the GDP and CE indicators constituted a causal loop, which implies that there is co-evolution between them, although the circular economy is still in its infancy. This co-evolutionary sustainable economic growth can bring welfare to future generations.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Abbreviations
- ARDL:
-
Autoregressive distributed lag model
- CE:
-
Circular economy
- CUR:
-
Circularity rate
- C2C:
-
Cradle to cradle
- EC:
-
Energy consumption
- EE:
-
Environmental employment
- ELEC:
-
Electricity consumption
- ETax :
-
Environmental taxes
- GDP:
-
Gross domestic product
- GDPp:
-
Gross domestic product per capita
- GMM:
-
Generalized method of moments
- GMWp:
-
Municipal waste generation per capita
- GPP:
-
National Green Procurement Plans
- HE:
-
Heating energy
- INV:
-
CE-related investment
- LF:
-
Labor force–related variables
- LU:
-
Luxembourg
- MSWG:
-
Municipal solid waste generation
- PAT:
-
Recycling-related patents
- REC :
-
Renewable energy consumption
- R&D:
-
The expenditure of R&D
- RbW:
-
Recycling of bio-waste
- ReP:
-
Recycling rate of e-products
- RecyFact:
-
Recycling factor
- ResoFacts:
-
Resource consumption factors
- ReW:
-
Recycling rate of e-waste
- RMW:
-
Recycling rate of municipal waste
- RP:
-
Resource productivity
- RpW:
-
Recycling rate of packaging waste
- S_Innov:
-
Market share of environment-related innovative products
- S_REC:
-
Share of renewable energy in electricity
- TMR:
-
Trade in recyclable raw materials
- VAR:
-
Vector autoregression model
- VECM:
-
Vector error correction model
- WEEE:
-
Waste electrical and electronic equipment
- YCG:
-
Per-capita GDP growth
- ≅/≈/≠ :
-
Negative/positive/no influence
- ↔/→/~:
-
Bidirectional/unidirectional/no causality
References
ABiresearch (2021) Sustainability in action: by 2030 10.5% of the world will have achieved circularity. https://www.abiresearch.com/ Accessed 1 December 2021.
Bercu AM, Paraschiv G, Lupu D (2019) Investigating the energy–economic growth–governance nexus: evidence from central and eastern european countries. Sustainability. 11:3355. https://doi.org/10.3390/su11123355
Boubellouta B, Kusch-Brandt S (2020) Testing the environmental Kuznets curve hypothesis for E-waste in the EU28+ 2 countries. J Clean Prod 277:123371. https://doi.org/10.1016/j.jclepro.2020.123371
Busu M (2019) Adopting circular economy at the European union level and its impact on economic growth. Social Sciences 8:159. https://doi.org/10.3390/socsci8050159
Busu M (2020) Analyzing the impact of the renewable energy sources on economic growth at the EU level using an ARDL model. Mathematics 8:1367. https://doi.org/10.3390/math8081367
Busu M, Trica CL (2019) Sustainability of circular economy indicators and their impact on economic growth of the european union. Sustainability 11:5481. https://doi.org/10.3390/su11195481
CEAP (2021) The EU’s circular economy action plan. https://www.cencenelec.eu/news-and-events/news/2021/briefnews/2021-02-03-eu-circular-economy-action-plan/ Accessed 1 June 2021.
CGR (2021) New Circular Gap 2021 World Report. https://www.interregeurope.eu/smartwaste/news/news-article/11199/new-circularity-gap-2021-world-report/ Accessed 20 June 2021.
Choi M (2001) Threat effect of foreign direct investment on labor union wage premium. 10.2139/ssrn.335480 Accessed 15 May 2021.
Ellen MacArthur Foundation (2015) Growth within: a circular economy vision for a competitive Europe. https://ellenmacarthurfoundation.org/growth-within-a-circular-economy-vision-for-a-competitive-europe. Accessed 20 April 2021
Engle RF, Granger CW (1987) Co-integration and error correction: representation, estimation, and testing. J. Econometric Soc 251–276. https://doi.org/10.2307/1913236
Eurostat (2021) https://ec.europa.eu/eurostat/home? Accessed 10 December 2021
Gardiner R, Hajek P (2020) Municipal waste generation, R&D intensity, and economic growth nexus–A case of EU regions. Waste Manage 114:124–135. https://doi.org/10.1016/j.wasman.2020.06.038
Georgescu I, Kinnunen J, Androniceanu AM (2022) Empirical evidence on circular economy and economic development in Europe: a panel approach. J Bus Econ Manag 23:199–217. https://doi.org/10.3846/jbem.2022.16050
Houten FV, Ishii N (2019) It's time for the circular economy to go global - and you can help. https://www.weforum.org/agenda/2019/01/its-time-for-the-circular-economy-to-go-global-and-you-can-help/. Accessed 15 March 2020
Hysa E, Kruja A, Rehman NU, Laurenti R (2020) Circular economy innovation and environmental sustainability impact on economic growth: an integrated model for sustainable development. Sustainability 12:4831. https://doi.org/10.3390/su12124831
Kao C, (1999) Spurious regression and residual-based tests for cointegration in panel data. J. Econom 90:1–44. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.81.4924&rep=rep1&type=pdf. Accessed 15 March 2020
Korhonen J, Nuur C, Feldmann A, Birkie SE (2018) Circular economy as an essentially contested concept. J. Clean Prod 175:544–552. https://doi.org/10.1016/j.jclepro.2017.12.111
Levin A, Lin CF, Chu CSJ (2002) Unit root tests in panel data: asymptotic and finite-sample properties. J. Econometrics 108:1–24. https://doi.org/10.1016/S0304-4076(01)00098-7
Maddala GS, Wu S (1999) A comparative study of unit root tests with panel data and a new simple test. Oxford B. Econ. Stat 61:631–652. https://doi.org/10.1111/1468-0084.0610s1631
Manta AG, Florea NM, Bădîrcea RM, Popescu J, Cîrciumaru D, Doran MD (2020) The nexus between carbon emissions, energy use, economic growth and financial development: evidence from central and Eastern European Countries. Sustainability 12:7747. https://doi.org/10.3390/su12187747
Magazzino C, Mele M, Schneider N (2020) The relationship between municipal solid waste and greenhouse gas emissions: Evidence from Switzerland. Waste Manage 113:508–520. https://doi.org/10.1016/j.wasman.2020.05.033
McKinsey & Company (2015) Europe’s circular-economy opportunity. https://www.mckinsey.com/business-functions/sustainability/our-insights/europes-circular-economy-opportunity Accessed 10 July 2020
Pao HT, Chen CC (2021) The dynamic interaction between circular economy and the environment: evidence on EU countries. Waste Manag & Research 0734242X211057015. https://doi.org/10.1177/0734242X211057015
Pedroni P (1999) Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford B. Econ. Stat 61:653–670. https://doi.org/10.1111/1468-0084.0610s1653
Pineiro-Villaverde G, García-Álvarez MT (2020) Sustainable Consumption and Production: Exploring the Links with Resources Productivity in the EU-28. Sustainability 12:8760. https://doi.org/10.3390/su12218760
Siminică M, Avram M, Roxana LP, Avram L (2020) The adoption of National Green Procurement Plans from the perspective of circular economy. Amfiteatru Econ 22:15–27. https://doi.org/10.24818/EA/2020/53/15
Simionescu M, Bilan Y, Krajňáková E, Streimikiene D, Gędek S (2019) Renewable energy in the electricity sector and GDP per capita in the European Union. Energies 11:3433. https://doi.org/10.3390/en12132520
Smolović JC, Muhadinović M, Radonjić M, Đurašković J (2020) How does renewable energy consumption affect economic growth in the traditional and new member states of the European Union? Energy Rep 6:505–513. https://doi.org/10.1016/j.egyr.2020.09.028
Sulich A, Sołoducho-Pelc L (2022) The circular economy and the Green Jobs creation. Environ. Sci. Pollut. Res 29:14231–14247 https://doi-org.ezproxy.lib.nctu.edu.tw/10.1007/s11356-021-16562-y
Sverko Grdic Z, Krstinic Nizic M, Rudan E (2020) Circular economy concept in the context of economic development in EU countries. Sustainability 12:3060. https://doi.org/10.3390/su12073060
Tantau AD, Maassen MA, Fratila L (2018) Models for analyzing the dependencies between indicators for a circular economy in the European Union. Sustainability 10:2141. https://doi.org/10.3390/su10072141
The World Bank (2021) "World Development Indicators." URL: http://data.worldbank.org/data-catalog/world-development-indicators Accessed 10 December 2021
Trica CL, Banacu CS, Busu M (2019) Environmental factors and sustainability of the circular economy model at the European Union level. Sustainability 11:1114. https://doi.org/10.3390/su11041114
Vuţă M, Vuţă M, Enciu A, Cioacă SI (2018) Assessment of the circular economy's impact in the EU economic growth. Amfiteatru Econ 20: 248-261. 10.24818/EA/2018/48/248
Availability of data and material
Data and materials are available upon request.
Author information
Authors and Affiliations
Contributions
Chen and Pao provided conceptualization and first draft preparation; Chen and Pao completed methods, data, and analysis development; Chen and Pao reviewed and edited.
Corresponding author
Ethics declarations
Ethical approval
Not applicable.
Consent to participate
Not applicable.
Consent for publish
Not applicable.
Competing interests
The authors declare no competing interests.
Additional information
Responsible Editor: Nicholas Apergis
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Chen, CC., Pao, HT. The causal link between circular economy and economic growth in EU-25. Environ Sci Pollut Res 29, 76352–76364 (2022). https://doi.org/10.1007/s11356-022-21010-6
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11356-022-21010-6